Integrating 3D Printers In the Supply Chain and the Impact on Logistics

Announced this week, China state firms, including the Postal Savings Bank of China, have teamed up on an initiative to invest in new technologies, in “emerging strategic industries,” including robotics, clean energy, aerospace, quantum communication, high-speed rail and 3D printing. The initiative takes advantage of a 200 billion yen venture capital fund approved by China’s state council last year for companies to invest in new technologies.

3D printing is not a new topic for PostalVision – we’ve provided regular updates on the exciting growth of this industry, as well as discussions on how it will shape the future of the supply chain and logistics in our ecosystem. And at the recent PostalVision 2020/7.0 event held in the Washington, DC area, SAP’s senior vice president of IoT and Digital Supply Chain Gil Perez talked about how base assumptions in traditional distribution and supply chain management will be disrupted and overturned as a result of advancements such as 3d printing.

Significant Growth Projected

Perez said the 3D printing industry expected growth is around 400% through 2021, noting that 2014 and 2015 each saw $1 billion in growth in the industry after it took the previous 5 years to reach the $1 billion growth mark, so the speed of the market growth has significantly accelerated in the past few years.

In addition to the significant growth projections for the 3D printing industry, there is also the impact on reducing the global inventory which currently is estimated at a value of over $10 trillion. Reducing that by just 5% would free up to $500 billion in capital, Perez noted, as well as reducing waste and improving efficiency. Even if 3D printing captured only 2% of the global manufacturing market – which is estimated at around $80 trillion – that would create a $640+ billion market opportunity, Perez said.

How On-Demand Printing Will Change the Supply Chain

On demand 3D printing ties into the concept of local manufacturing, Perez told the PostalVision event attendees, and will have a huge impact on the entire supply chain. He said additive manufacturing (aka 3D printing) is only one technology that enables on-demand local manufacturing and that there are others evolving very quickly. Part of the driver around the acceleration of 3D printing industry growth is the expiration of manufacturing patents, Perez said.

Perez stressed that 3D or on-demand printing will not replace everything, but said there are industries pursuing industrial applications that are ready to “break out” in growth. There is a big difference between the growth rate for consumer 3D printing vs. industrial 3D printing, he said, with the latter having been around for a long time but many companies going to market today. The health industry is one aggressively pursuing 3D printing and the news is rife with articles on rapid advancement of the technology in the field, with Perez noting a $500 million investment into 3D printing/manufacturing plants. Another industry rapidly accelerating into additive manufacturing is the automotive and large machinery industry who are looking at it for on-demand parts manufacturing.

For classical product lifecycle, rapid prototyping has been around for some time, Perez said, but now with 3D printing price points, economies and capabilities improving, it is going into the initial introduction of products so on Day 1, roll out in certain markets is enabled without a big production line, then larger investment can be made later on when larger quantities of products are needed.

One of the key elements driving 3D printing is cost, Perez told the PostalVision group, because if you look at manufacturing as an end-to-end process vs. the part creation alone, the cost is different. He shared the example of having to produce a minimum order quantities (MOQs) and being in the long tail of a product lifecycle where you only need 50 or 100 per year but have run out. The MOQ for manufacturing may be 1000 items so if you look at the entire cost including the inventory cost, on demand printing becomes very attractive.

Perez said another key point is that buyers and sellers and connecting in different ways today. If you think of the logistics network of the future, he said, it’s not just about moving things around, it’s about evolving with functionalities and capabilities to differentiate. Businesses need to think not about copying from or optimizing existing networks, but how to look at upcoming technology coming to maturity and integrate it into their existing models to offer new services, new capabilities and new customer loyalty, he said. The SAP/UPS 3D printing hub collaboration (http://www.businessinsider.com/ups-sap-fast-radius-on-demand-3d-printing-2016-11) is an “effort to bring 3D printing full steam into the world of scaled industrial production,” according to Business Insider.

Using UPS’ distribution hub and an on demand manufacturing partner hosted inside, orders can be received and produced on demand at the hub, then trucked to planes and delivered in the U.S. using UPS’ distribution network. Perez said many companies are re-thinking their manufacturing and distribution and moving to becoming “design authorities” who send design files somewhere to be produced by third parties.

Use Cases for 3D Printing in Manufacturing

There are lots of great primary use cases for 3D printing in manufacturing, Perez told the PostalVision group. Not only long tail and spare parts, but cases where temporary parts are needed or replacement parts in lots of 1. There are also new “native 3D” printed parts being adopted by engineering, quality and procurement teams where a part can be manufactured as a single 3D printed piece which may have required multiple separate pieces to be manufactured using traditional methods.

UPS is also highly engaged in the 3D printing arena, not only through its distribution partnership with SAP. UPS recently featured discussion on 3D printing in a two-part series on its Longitudes blog (https://longitudes.ups.com/3d-printing-evolution-rather-than-revolution/). In part one, engineer and writer Ralf Steck talks about how parts manufactured by 3d printers (or additive manufacturing processes) differ from those produced in molds and the 3D printing “evolution.” In the second article of the UPS series (https://longitudes.ups.com/3d-printing-evolution-rather-than-revolution-part-2/), Steck talks about the distinct advantages of 3d printing, which include design freedom, customization…and “simplified logistics.” He gives examples of where 3d printing on site makes much more sense than halting operations to get part delivery from a supplier. “If logistics are more expensive than the 3D-printing surcharge, or when the supply chain needs to be shortened, great opportunities arise,” Steck writes.

SAP’s Distributed Manufacturing process, which Perez says is running in many companies, starts with a view of thinking about the business. Not every part needs to be optimized, so focus should be on where it makes sense from a business perspective. Once a list is developed, it’s not just a matter of printing a part and giving it to a customer, there are liability, insurance, name, and brand quality checks that need to be done before the product can be introduced and approved so that when the product is printed by one location, it has the same quality as if printed somewhere else in the world.

SAP is also engaged with three different posts, Perez told the PostalVision audience, who are looking at how they change their models to create new revenue streams to compensate for declining volumes in other markets, as well as cultivate B2B relationships.